Chapter 3

Question 1

is needed to make corporate management more accountable and auditors more rigorous.

Answer 1

Corporate Governance

Question 2

requires fair legal frameworks that should be enforced impartially.

Answer 2

Good Governance

Question 3

The Philippine Securities and Exchange Commission (SEC) issued Memorandum Circular No. 2, s. 2002, otherwise known as the

Answer 3

Code of Corporate Governance

Question 4

internal control and BOD as overseer

Answer 4

Audit Committee

Question 5

review and evaluate BOD nominated persons

Answer 5

Nomination Committee

Question 6

in charge of establishing procedure and policy on executive remuneration.

Answer 6

Compensation or renumeration committee

Question 7

may establish a performance evaluation system to measure performance of the Board and top-level management of the corporation

Answer 7

management

Question 8

making sure FS and reports are reasonably accurate and fair.

Answer 8

Audit Committee

Question 9

decides on the base compensation, stock option awards, and incentive bonuses for the company’s executives and CEO

Answer 9

Compensation Committee

Question 10

are one of the most important external institutions in governance. They help to ensure that firms are run efficiently by keeping public records accurate, adhering standards of reporting for public purposes, and taxes paid properly and on time.

Answer 10

Independent Auditors

Question 11

is derived partly from the general political climate in a country.

Answer 11

The legal environment

Question 12

are considered the most important institution of corporate governance.

Answer 12

Markets

Question 13

may create major threat or open possibilities for an organization.

Answer 13

External Environment

Question 14

the politics of a country or a region affects the policies and benefits that a firm derives from the system.

Answer 14

Political Environment

Question 15

any new development may render an organization’s processes and systems obsolete if it is not quick to respond to the new changes

Answer 15

Technological Environment

Question 16

comprises the general behavior of the society and includes the ethical leanings of individuals responsible for the functioning and survival of the organization.

Answer 16

Social Environment

Question 17

is combining of two or more corporations into one.

Answer 17

Merger

Question 18

can also be employed in a hostile takeover, a setting where a business is acquired against the management’s or some shareholders’ wishes.

Answer 18

Anti-takeover defenses

Question 19

are designed to make a company unattractive to predators.

Answer 19

Anti-takeover tactics

Question 20

allows existing shareholders to purchase more shares at a discount.

Answer 20

flip-in

Question 21

allow shareholders to purchase the bidder’s shares at a discount

Answer 21

flip-over

Question 22

It refers to the act of the reimbursing officers and directors for expenses incurred, liabilities accrued, and amounts paid to defending claims brought to them for actions taken on behalf of the corporation.

Answer 22

Indemnification of Officers and Directors

Question 23

no special rights or restrictions

Answer 23

Ordinary shares

Question 24

gives the holder preferential treatment

Answer 24

Preference shares

Question 25

gives holders the right that, if a dividend cannot be paid one year, it will be carried forward to the succeeding years

Answer 25

Cumulative preference shares

Question 26

comes with an agreement that the company can buy them back at a future date.

Answer 26

Redeemable shares

Question 27

It refers to percentage of ownership that is way above the simple majority which is , one half plus one share of the total shares outstanding.

Answer 27

Supermajority

Question 28

Usually supermajority could mean

Answer 28

67% to 90%

Question 29

is a legal contract among shareholders of a corporation involving voting of shares.

Answer 29

Legal Voting arrangement

Question 30

agreement to establish right of representation to the BOD.

Answer 30

Board appointment rights

Question 31

right to overturn decisions reach by the board.

Answer 31

Veto Rights